An 'oil'igopoly theory of exploration
This paper develops a theory of [`]oil'igopoly exploration of an exhaustible resource. Strategic exploration and production are jointly derived in a three period subgame perfect equilibrium. While the [`]oil'igopoly theory of exploration shares many features with non-strategic models of exploration and production, there is one important difference. The [`]oil'igopoly theory of exploration predicts that firms who exhaust their proved reserves before they can convert their unproved reserves into proved reserves have an incentive to over-explore, relative to the Nash equilibrium level of exploration. A simple empirical prediction is that firms holding smaller proved reserves should be observed doing more exploration. This prediction is consistent with country-level production and reserve data in the post-World War II era.
Year of publication: |
2008
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Authors: | Boyce, John R. ; Vojtassak, Lucia |
Published in: |
Resource and Energy Economics. - Elsevier, ISSN 0928-7655. - Vol. 30.2008, 3, p. 428-454
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Publisher: |
Elsevier |
Saved in:
Online Resource
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